IEA destroys energy security argument for new fossil fuels

The International Energy Agency recently published the annual update to its World Energy Outlook. This is the first WEO to be released since Russia’s invasion of Ukraine and the energy crisis that ensued.

Commenting on the 2022 World Energy Outlook, Alex Hillman, Lead Analyst at the Australasian Centre for Corporate Responsibility (ACCR), said:

“Despite fossil fuel demand projections steadily decreasing in previous versions of the WEO, this is the first year where every fossil fuel reaches peak demand in every scenario.

“The IEA has made it clear that the tragedy of the Ukraine war is a temporary sugar rush for fossil fuel companies.

“Today’s sky high prices are permanently destroying fossil fuel demand, especially for gas, but prices will normalise before any new fossil fuel investment can start generating revenue.

“This is all very embarrassing for Woodside CEO Meg O’Neill, who has habitually claimed the Ukraine crisis will prop up gas demand for decades, blatantly ignoring the risks that demand destruction presents to shareholders.

“In all but the highest emissions scenario, there is now enough LNG capacity operating or under construction to meet all LNG demand until at least 2050. Any new LNG project is now banking on our complete failure to manage climate change.

“Considering Woodside and Santos’ gas expansion plans, this is a major issue for shareholders. We are watching stranded asset risks emerge in real time.

“The IEA also concludes that coking coal demand in 2030 will be lower than today in every scenario, with further significant falls beyond 2030. This flies in the face of BHP’s claims that its coking coal business will be resilient in even a 1.5C scenario.

“It also demonstrates how absurd BHP’s proposed 90 year Blackwater South mine is, along with the 93 year extension being sought for the Peak Downs coal mine.

“For the Paris-aligned Net Zero Emission scenario, no new conventional oil and gas projects, or any coal mines or coal mine life extensions are needed. Any new fossil fuel project remains at odds with the Paris Agreement.

Background

The WEO includes three scenarios:

• The Stated Policies Scenario (STEPS) that results in 2.5C of climate change by 2100
• Announced Pledges Scenario (APS; 1.7C) and
• the Net Zero Emission scenario (NZE; 1.4).

The NZE is the only scenario that meets the objectives of the Paris Agreement.